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James Corporation owns 80 percent of Carl Corporation's common stock. During October, Carl sold merchandise to James for $307,000. At December 31, 50 percent of this merchandise remains in James's inventory. Gross profit percentages were 35 percent for James and 45 percent for Carl. The amount of intra-entity gross profit in inventory at December 31 that should be eliminated in the consolidation process is

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3 votes

Answer:

$69,075

Step-by-step explanation:

James Corporation

Merchandise remaining in James’s inventory:

$307,000 × 50% = $153,500

Intra-entity gross profit:

$153,500 × 45% = $69,075.

James’s ownership percentage of Carl will have no impact on this computation.

Therefore the amount of intra-entity gross profit in inventory at December 31 that should be eliminated in the consolidation process is $69,075

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